Investors Flee Crypto for Domestic Stocks Amid Global Uncertainty, Costing $24B

Korean crypto market losses reached $24 billion between January and June 2025, with domestic holdings plummeting from KRW 121.8 trillion to KRW 89.2 trillion, according to the Bank of Korea’s Financial Stability Report. Daily trading volumes on domestic exchanges collapsed by over 80%, declining from KRW 17.1 trillion in December 2024 to KRW 3.2 trillion by June 2025. Despite Bitcoin’s price appreciation during the same period, retail investors actively withdrew funds, with exchange deposits dropping from KRW 10.7 trillion to KRW 6.2 trillion. This exodus coincided with a strategic shift toward domestic equities, as Korean investors redirected capital to local stocks, particularly U.S. tech holdings, which outperformed overseas markets amid a stronger won.

The Bank of Korea attributed the decline partly to investors pivoting to domestic assets during a period of global uncertainty, notably U.S. tariff policy volatility. Retail investors sold net $657 million in Tesla holdings in August alone, while crypto-related stocks like Bitmine Immersion Technologies attracted $253 million in inflows. Despite the market downturn, global crypto markets expanded to $4.2 trillion in capitalization by September 2025, representing 3.2% of the worldwide stock market. Institutional adoption and legislative progress, including the U.S. GENIUS Act, supported this growth.

South Korea’s government, however, accelerated pro-crypto policies during the decline. President Lee Jae-myung designated digital asset development a “key national task,” and the Democratic Party launched a crypto policy task force to draft legislation by year-end. Regulatory reforms included reclassifying trading firms as “venture companies” to grant tax incentives and access to state-backed financing. Financial regulators also lifted restrictions on institutional crypto investments and prepared frameworks for the nation’s first spot crypto ETFs. Major banks, including Woori, Kookmin, and Shinhan, established dedicated crypto teams to prepare for market entry.

Despite outflows, over 10,000 residents held crypto assets exceeding 1 billion won ($750,000), and 10.86 million active trading accounts represented 20% of the population. Survey data revealed 51% of South Koreans aged 20–59 had crypto experience, with 27% currently holding digital assets. Early adopters typically began with Bitcoin before diversifying into altcoins and stablecoins, with 60% starting during the 2020 bull run.

The decline coincided with intensified regulatory scrutiny. South Korea flagged 36,684 suspicious crypto transactions in 2025—surpassing the combined totals of the past two years—highlighting concerns over illegal foreign remittances and stablecoin misuse. Authorities attributed 90% of crypto-linked crimes to “hwanchigi” schemes, where illicit funds were converted into crypto via offshore platforms.

The Korean crypto market’s collapse reflects a complex interplay of investor behavior, regulatory shifts, and global economic dynamics. While pro-crypto policies aim to foster long-term growth, immediate challenges include balancing retail investor protection with market innovation. The government’s focus on won-pegged stablecoins and institutional participation may yet reshape the landscape, but current outflows underscore the fragility of a market historically driven by speculative retail activity.